Commitments and payments

Last week’s deal on the 2014-20 multi-annual financial framework sets ceilings for spending. Every year, the member states and MEPs will negotiate an actual budget, with the totals remaining within the overall ceilings. There are two categories in the MFF and in the annual budgets – one known as ‘commitments’ (under the new MFF, these are capped at €960 billion), the other as ‘payments’ (capped at €908bn).

The commitments refer to pledges to provide certain amounts of funding for specific activities. Payments refer to the estimated amounts needed for the period of the budget based on the commitments made.

Payments are lower in any given period because commitments are made over several years and across budget cycles. (This results in outstanding commitments – those that have not yet resulted in payments – known in EU jargon as reste à liquider, or RAL. At present, the outstanding amount is €217bn.)

The split into commitments and payments allowed EU leaders to deliver different messages after last week’s summit. While most of the negotiations had focused on commitments, declarations focused on payments as David Cameron, the UK’s prime minister, and others sought to present as low an overall figure to their electorates as possible. The EU’s net beneficiaries, meanwhile, were able to play up the commitments.

Claims were made by some EU leaders and many MEPs, including Martin Schulz, the president of the European Parliament, that the gap between commitments and payments had widened with last week’s deal – thereby setting the EU on course to being a “deficit union”. But payments as a share of commitments has in fact stayed more or less the same: 94.72% for the next budget cycle and 94.83% in the current cycle.

The figures are given in 2011 prices (the year in which the European Commission made its proposal for the budget cycle) rather than current prices. Since the EU budget is automatically adjusted for 2% inflation each year, the €960bn commitment ceiling for the next multi-annual budget will have risen to €1,019bn by the time the period starts, in 2014.l